FARMERS BRANCH, Texas-Texas Dow Employees CU has rolled out a credit card designed to appeal to a relatively affluent membership base.
"We looked at our membership and the products and services we offered and realized there was a gap with our more affluent members," Ron Wright, VP-payment systems, told Credit Union Journal. "We didn't have anything to compete with an American Express or Discover card. We decided our best option was to create our own product."
Blending Lines
The result is Onyx, which blends revolving and non-revolving credit lines. Targeting members with credit scores of 720 or higher, cardholders with a $10,000 credit limit can access up to three times the line of credit. The first $10,000 is on a revolving limit, as on a traditional card. The remaining balance, or non-revolving credit, is due in full at the end of each billing cycle.
Cardholders earn up to 2% cash back for all purchases, including non-revolving transactions. The card comes with a benefits package that includes purchase assurance, price protection, extended warranty, travel accident and baggage delay insurance, master rental and concierge service. "We created this card from scratch," Wright noted, "and because we were able to hand pick, I think we ended up with everything we wanted. The 'Triple the Buying Power' feature is unique - to my knowledge we are the only ones to offer that."
The most challenging development issue lay in the dual credit lines with different pricing. TDECU worked with Dallas-based processor TNB to develop the card, with Wright acknowledging there was a "learning curve" for both parties. "But TNB was more than willing to do whatever it took to help us create the product."
A TNB spokeswoman said the company worked with both Visa and MasterCard to research issues related to the card. "The Onyx card, from a processing standpoint, is complex due to the fact it has a revolving line and a non-revolving line," the spokesperson explained. "If you look at a cardholder with a $10,000 revolving line, the Onyx card adds triple the buying power with a $20,000 non-revolving line on top. The processing system had to be modified to be able to handle such transactions."
New Fraud, Risk Management Tools
TNB had to develop new fraud tables and risk management strategies designed just for the Onyx card, and deploy an advanced behavioral scoring system to monitor cardholder credit on an automatic basis. It sets spending thresholds based on the evolving credit score of the cardholder.
TNB uses this behavioral scoring system in some other instances with credit unions, but it was required for the Onyx card due to its complexity.
The Onyx card soft-launched with approximately 30 cardholders shortly before Christmas 2008. For the last seven months it has been tested to make certain everything worked flawlessly. TDECU's Wright said Onyx is fully available, "but we don't actively seek accounts; accounts seek us."
"We are treating it as a truly high-end card," he said. "We have had steady growth of between five and 10 accounts per month, and that's exactly where we want it to be. We are up to about 120 accounts."
Wright said TDECU expects the Onyx card will be a profitable program within the next 12 months, once it recovers the initial development costs.
